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Expedia Group Seems Unable To Reach The Promised Land

Expedia Group Seems Unable To Reach The Promised Land

Expedia (NASDAQ: EXPE) has missed analysts' expectations both when it comes to revenue and earnings per share. But Diller and Kern who are running the boat now vowed to execute $300 million to $500 million cost cuts during 2020 along with pledging double-digit adjusted EBITDA growth. And Wall Street and investors loved it as its share price rose 10 percent in after-hours trading on Thursday.

Fourth Quarter And FY2019

As for the quarter, revenue did manage to expand 8 percent to $2.63 billion but adjusted EPS dropped 1 percent to $1.24. When it comes to fiscal year 2019, revenues amounted to $12 billion in revenue in 2019 which is up 8 percent, resulting in profits of $565 million.

Expedia Group Chairman Barry Diller and Vice Chairman Peter Kern, who are now running the show and retooling the giant online travel company, admitted that the last few months have been a fair bit of wasted energy and calories going at things" that may not have delivered Expedia "to the promised land."

Bloated Company

Expedia increased its employee team from 24,500 employees at the end of 2018 to 25,400 people as of Dec. 31. But redundancies seem to be on the horizon as its chairman finds Expedia to have been a bloated organization," explaining that the company plans to simplify and streamline operations and later acknowledging that the restructuring about to take place will have an impact on people which is expected for savings on such a scale.

The company already moved its headquarters from Bellevue, Wash., to a large campus on the Seattle waterfront last year. And this was only just weeks before the dramatic executive shakeup as its former CEO Mark Okerstrom and CFO Alan Pickerill abruptly resigned on Dec. 4. The cited reason was a disagreement between the executives and the board regarding the company's strategy and consequent future efforts.

Expedia Is In For Some Serious Cutbacks And Changes In Organizational Culture?

While some people have argued that work-life balance at fellow Seattle company, Inc. (NASDAQ: AMZN) is ‘all work no life'', Diller referred to  Expedia as "all life and no work". And although an exaggeration, the company seems to have lost clarity and discipline.

But Diller is confident that Expedia can beat the competition in years to come if it can get back to a pragmatic focus, meaning to cut costs and simplify operations.

Revamping The Brand

It's fairly unusual for a chairman who's led a company for two decades, alongside the fact Expedia was his first investment, to admit that he now really started to understand the inner workings and complexities of Expedia Group.

But it is what it is and the executive team will shift away from ‘brand-to-brand' approach and will look at every market it's in. An example being that those likely with a higher profile, like Expedia can afford to rationalize marketing spend. Consequently, it will push the best brands in every market and consider withdrawing others – they will do what seems smart for the greater good- both operational and marketing wise. But competition remains tough and the macroeconomic climate cruel as even competitor's Trip Advisor Inc's (NASDAQ: TRIP) revenue fell and its stock has had quite a drop of 50 percent last year.

Bye, Bye Google – Not Farewell But Close Enough

Diller said Expedia Group will lean away from Google Inc (NASDAQ: GOOGL) and metasearch, as it will try to  aggressively build its direct business through app downloads, generating greater consumer loyalty, and pushing its Expedia Partner Services business, which doesn't rely on Google. Expedia Group will focus its efforts at mobile and direct business so it doesn't have to keep "re-fishing" for customers from Google and other search engines.

Coronavirus Impact

CFO Eric Hart forecasted an impact of $30 million to $40 million on adjusted earnings in the first quarter from the pandemia. In fact, the volatility of that impact and the lack of certainty about the timing of run-rate cost cuttings were two of the factors the company cited for not issuing specific 2020 guidance.

And this epidemic that has taken 1,300 lives has indeed raised concerns for the whole macroeconomy with its impact stretching further into 2020. But regardless of this strong headwind, Black Swan to be more precise, Expedia has many inner headwinds to deal with first. Overall, the latest report emphasized the need to bring in an efficient operating mind to literally everything the company does in hopes for a better tomorrow.

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